Material Costing

Cost Plus Contract

What is Cost Plus Contract? – Definition Sometimes contractors may accept a contract on the condition that the contractee would bear all costs incurred in executing a contract plus a fixed rate or percentage of profit calculated with reference to the total cost. Such contract is known as Cost Plus Contract and is generally adopted …

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Contract Costing

What is Contract Costing? – Definition Contract costing is the method of costing which is applied in a business where separate contracts of non-repetitive nature are undertaken. According to Sharie, “Contract or terminal cost accounts are applicable to a concern which makes specific contracts and requires to know the cost of each.” A contract is …

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Contract Account

What is Contract Account? – Definition When a contract has been accepted by the contractor, a separate account is opened for each contract in order to bring together all costs relating to a particular contract, and a serial number is given to each contract, which is called contract account. Explanation of Contract Account All expenses incurred …

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Cost Price Method

Explanation of Cost Price Method Under cost price method, materials issued to production, are charged out on the basis of actual cost i.e., the cost at which these have been purchased. As we already know, the actual cost of materials consists of purchase price or invoice price (less trade discount and quantity discount), import duty, …

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Material Abstract

Definition and Meaning In order to ascertain the cost of materials used on a particular work-order or job, an analysis of Material Requisitions, Material Returned Notes and Material Transfer Notes is made on sheets specially meant for this purpose which are known as Materials Abstract or Materials Issue Analysis sheet. Specimen/Format of Material Abstract The …

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Maximum Stock Level

Maximum Stock Level is the upper limit of stock above which the stock should not be allowed to exceed under normal circumstances without the prior sanction of the management. The main object for fixing up the maximum stock level is to avoid undue investment of capital leading to loss of interest, obsolescence of materials and …

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Methods and Principles of Codification of Materials

Methods of Codification Some of the common methods of codification of materials may be enumerated as follows: 1. Alphabetical Codification of Materials As the name indicates, this method involves the use of letters of alphabets as codes to facilitate easy and quick identification of materials. For example: Symbole Description A Raw Materials B Tools and …

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Stores management in manufacturing concerns

In manufacturing concerns, stores may be managed as: (a) Centralized Stores, (b) Decentralized Stores, and (c) Centralized Stores with sub-stores. Centralized Stores Management Centralized storing refers to the setting up of a single store-house for the whole organization. It caters to the needs of all the departments working in the organization. Such stores are advocated …

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Store Keeping

After materials purchased have been received and checked, the next step in the process of material control is the storing of materials or store keeping. ‘Store keeping’ refers to the safe custody of all items of raw materials, supplies, finished parts, purchased parts etc., in the store-room for which the store-keeper acts as a trustee. …

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Receiving and Inspection of the materials

Receiving of Materials In small and medium-sized manufacturing concerns, functions of receipt and inspection of materials are to be performed by the stores department or the store-keeper. But in case of large manufacturing concerns, generally, a separate Receiving Department is set up. The Receiving Department has the following functions to perform: (i) To receive, unload …

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Material Cost

Definition Material is the most important element of cost. In most of the manufacturing concerns, 50% to 70% of the total cost of a product is represented by the cost of the material. The material cost has been defined by the Institute of Cost and Management Accountants, U.K., as “the cost of commodities supplied to …

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Classification and Codification of Materials

Classification of Materials ‘Classification‘ refers to the systematic division, grouping or categorization of materials or store items with reference to some common characteristic. Classification of materials can be made on different bases namely nature, manufacturing process, value, purpose etc. For identification of materials being purchased and stored it is necessary that they should be properly …

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Material Control

Definition of Material Control “Materials control is the systematic control over the materials at all its stages—procurement, storage and usage—so as to help in maintaining regular and uninterrupted flow of the materials in the production pipeline.” No system of costing can be said to be complete without the proper system of material control. Material control …

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